Standard and Poor's raised Ford's rating from SD- (selective default) to CCC+, seven steps below the investment grade. The main factor behind the new rating was the debt reduction and which "improved Ford's capital structure," Autonews reported.
"The upgrade reflects our evaluation of Ford's creditworthiness following the company's completion of what we considered to be a distressed debt exchange," Standard and Poor's said in a release.
The rating improvement comes after Standard and Poor's decreased Ford's standing from CC to default on April 6. "They were selectively in default because they did not pay the bondholders the terms that they thought they were going to get. They were not, in effect, getting what they signed up for," an agency spokesman told the aforementioned source.
As we mentioned, the rating provider still has concerns regarding Ford's cash flow in the following months. "Our ratings reflect the possibility that the multiple problems Ford faces in stemming cash use could overwhelm its cash and liquidity during the next year. We expect Ford's cash outflows to further reduce its cash balances during the coming quarters, which will test the company's ability to maintain sufficient liquidity into 2010," the agency added.
As for the future of the automotive industry in the US, Standard and Poor's expects light-vehicle sales to stand at around 9.7 million units, the lowest in 42 years and down 26 percent from 13.1 million units in 2008. We currently expect sales to rise to 11.2 million units in 2010, but even with an improvement, sales would still be 15% below the weak levels of 2008.
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